Markets Overview: (Source: Bloomberg, FT, Reuters, DJ Newswires)

UK 100 called to open -55pts, with most of Asia weak on continued fears over the US fiscal cliff, renewed concerns regarding the Middle East geopolitical tensions, and unabated uncertainty/slow progress within the Eurozone sovereign debt crisis. Japan bucking the trend after PM opened door to early elections next month and likely change of power, and the opposition party’s leader reiterating calls for unlimited quantitative easing (QE) by the central bank (BoJ).

The next generation of leaders has been revealed in China, and the only real surprise is the absence of the heads of the Central bank (PBOC), signalling a likely retirement and change at the tiller.

This morning we’ve had French and German preliminary GDP figures beating expectations, setting up for a possible beat at 10am when the Eurozone figures are published. Ratings agency Moody’s has reiterated its AAA rating and negative outlook on the UK, underpinned by significant structural strengths, but weak economic prospects and Eurozone debt crisis are hampering progress.

Markets stayed weak after US close with Obama declaring that Bush era tax cuts for the wealthiest will expire, suggesting Republicans and Democrats still at loggerheads on the fiscal cliff ahead of their meeting on Friday, and that a drop over the cliff would likely lead to recession.

October’s minutes from the US Federal Reserve (Fed) FOMC meeting revealed that a number of members saw need for more QE when operation twist (sell short term debt, buy long term debt) expires. However some did question effectiveness of the recent QE3.

Uncertainty still high in the Eurozone, with hopes of a Spanish bailout request evaporated, while GDP figures from Greece showed a dire if not worsening situation, and suggesting troika attempts to call debt improvement targets a decade may be in vain.

This offset Greece securing financing to cover debt maturity, but this was countered by a German newspaper suggesting a decision to be made on Greek bailout tranche disbursement will not emerge next week leading to more/continued waiting. Spanish and Italian GDP at the market open unlikely to be pretty. Santander’s Chairman pleading case or EZ banking union in FT this morning, calling for swift implementation.

The UK 100 index remains under pressure breaking below recent lows of 5715. As signaled yesterday, a break of this would likely see the current correction continue with a move to 5600 likely welcome, encountering long-term (3.5yr) rising support. Any strength likely to find resistance at 5720, then 5790.

In FX, GBP/USD under pressure after gloomy inflation report from the Bank of England (BoE), and the door remaining open for more QE. EUR/USD continues to swing around with fiscal cliff and QE versus sovereign debt crisis. In commodities, Gold under pressure around $1725 on dollar strength vs GBP and JPY. US Crude ticked up to week-high of $86.5 and Brent up to $111 on Middle East tensions and supply concerns.

In focus today will be UK retail sales figures. After the recent higher-than-expected inflation figures, sales may have been dented by prices continuing to exceed wages growth. Eurozone GDP was expected to show the region heading back into recession, however better than expected figures from major component France and Germany may allow it to keep its head above water. US inflation seen stable, while jobless may have taken a tick up. Empire State manufacturing seen weakening. Wal Mart Q3 results of interest as US consumption indicator.

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Overnight Macro Data: (Source: Reuters/DJ Newswires)

• Aussie              New Motor Sales                    Weak
• France             GDP                                         Better
• Germany         GDP                                         Better
• See Live Macro calendar for all details

UK Company Headlines: (Source: Reuters/DJ Newswires)

• Frontier Resources International plc: Sale of U.S. Assets
• UK business props up WS Atkins in first half
• Qatar says it will back Xstrata-Glencore deal
• Kier reviews British construction operations
• Antofagasta nine month revenues, earnings rise
• Investec H1 profit down on lending and investments
• Insurer Amlin says sales up 11 pct
• Invensys sees improved year performance
• National Grid says Sandy impact outside LIPA below 100 mln stg
• Heritage Oil says proved reserves have increased
• Centrica sees strong FY profit growth at UK residential unit
• Insurer Resolution hit by rise in IT costs
• BP in advanced talks over Deepwater Horizon settlements
• Premier Oil sees increased cash flows in 2012, 2013